MW: Dollar reasserts gains after U.S. unemployment rate falls
By Deborah Levine & Steve Goldstein, MarketWatch
NEW YORK (MarketWatch) -- The dollar recovered some of the ground lost in volatile trading on Friday, staying at a seven-month high, after economic data showed the U.S. unemployment rate unexpectedly fell last month.
The dollar index (DXY 80.38, +0.46, +0.57%) , which tracks the greenback against a trade-weighted basket of six major currencies, rose to 80.303 from 79.882 in North American trading late Thursday.
The dollar also remains attractive investment for those who are looking to move assets to relatively safer territory amid ongoing credit concerns about some countries in Europe.
"We're not convinced that the declines in Europe have reached an end," said Todd Elmer, a currency strategist at Citi. "Dollar longs are attractive at this stage."
The euro (CUR_EURUSD 1.37, -0.01, -0.42%) fell further, down to $1.3674 down from $1.3754 late Thursday.
The dollar rose 0.3% to stand at 89.46 Japanese yen.
The dollar, during the European and Asian trading hours, extended a rally that started Thursday amid heightening fears that the U.S. economic recovery wouldn't turn out to be so strong as previously anticipated, and as credit risks in some European countries jumped, increasing demand for the relative safe haven of the U.S. currency. See story on credit and fiscal woes gripping Spain and Portugal.
Gains based on that move out of riskier assets remained as "U.S. data cannot fix the budgetary problems of Spain, Portugal and Greece," said Jane Foley, research director at Forex.com.
The euro (CUR_EURUSD 1.37, -0.01, -0.42%) fell further, down to $1.3674 down from $1.3754 late Thursday.
The dollar rose 0.3% to stand at 89.46 Japanese yen.
The dollar, during the European and Asian trading hours, extended a rally that started Thursday amid heightening fears that the U.S. economic recovery wouldn't turn out to be so strong as previously anticipated, and as credit risks in some European countries jumped, increasing demand for the relative safe haven of the U.S. currency. See story on credit and fiscal woes gripping Spain and Portugal.
Gains based on that move out of riskier assets remained as "U.S. data cannot fix the budgetary problems of Spain, Portugal and Greece," said Jane Foley, research director at Forex.com.
The Labor Department said U.S. nonfarm payrolls shed 20,000 jobs in January, while economists expected a net increase in jobs. The report also said the unemployment rate fell to 9.7%, while economists expected the rate to remain at 10%. Read story on employment data.
"The latest report is mildly positive for the U.S. dollar simply because it confirms that the U.S. economy is slowly recovering," Kathy Lien, director of currency research at Global Forex Trading, wrote in an email.
"It is becoming increasingly clear that the U.S. labor market has turned a corner and positive job growth will probably return in February, but unemployment remains high, which means that recovery will continue to be slow and messy," she said.
That will lend support to the dollar over time, Citi's Elmer said, even after fiscal problems in Europe, or the fears revolving around them, dissipate in the eyes of investors and traders.
"The skews moving forward are in favor of rises in U.S. yields and the dollar," Elmer said. "Stabilization in the U.S. economy will play a more important role in supporting the dollar as a recovery looks more vigorous than in Europe."
Meanwhile, interest-rate futures traders were busy refining their bets that the Federal Reserve would increase its benchmark interest rate by September, in the aftermath of the jobs report.
The federal-funds rate, the central bank's overnight target interest rate for loans between banks, has remained at a range of zero to 0.25% for more than a year.
Fed-fund futures showed traders see an 53% chance that the central bank will raise interest rates to 0.5% by September, a little lower than before the report.
Futures for December indicate a 71% expectation that rates will rise by 75 basis points, or 0.75%, by the end of the year, also a little lower compared to before the jobs data.
